Banks continued to analyze their balance sheets carefully in 2011, evaluating the delicate relationship between moving loans to the held-for-sale accounting category and its potential impact on their stock price. For the most part, analysts viewed these activities positively provided the institution had adequate capital. In 2011, compared to 2010, the additional capital and losses taken translated into more transactions.
But despite these positive actions to clean up non-performing commercial loans, there remains a staggering volume of non-performing residential loans on both the books of banks and GSEs Fannie Mae and Freddie Mac. According to a recent white paper from the Federal Reserve, currently, about 12 million homeowners are underwater on their mortgages—more than one out of five homes with a mortgage.
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